ABC Newsradio With Tony Eastley

TONY EASTLEY: New research into the carbon tax has found that steel makers would make a "windfall gain" under the Federal Government's carbon tax compensation package. The Grattan Institute also says that even if there was no compensation, miners of black coal or LNG producers would be unlikely to shed jobs due to the carbon tax. But the Government says the compensation is necessary to make sure that crucial industries can survive the transition to a clean economy. Stephen Dziedzic reports from Canberra.

STEPHEN DZIEDZIC: The Federal Government has always brushed off Opposition accusations that the tax will hurt industry and miners by pointing to the heavy compensation it's offering. But Tony Wood from the Grattan Institute says there's flimsy justification for the billions of dollars it's proposing to spend.

TONY WOOD: In the case of LNG our view would be that there was no justification for providing assistance to that industry. It's growing rapidly; it doesn't appear to be having problems with projects going ahead. In the case of coal, the assistance is targeted at coal mines that have very high levels of methane emissions and possibly would find it difficult to pay a high carbon price based on those emissions. Our view would be that you would be better off shifting to coal mines in Australia without those methane emissions.

STEPHEN DZIEDZIC: And he says the Federal Government's handing a "windfall" to steel producers by giving them full compensation for the tax. He concedes the industry faces steep challenges due to the high Australian dollar. But he says the Government is taking a muddled approach by trying to help it through carbon tax compensation.

TONY WOOD: What they should not do is use carbon pricing as an excuse or a reason for providing assistance to an industry that's potentially in some major long-term structural challenging positions. The risk is you end up reverting to a form of protectionism that we should have left behind.

STEPHEN DZIEDZIC: The parliamentary secretary for climate change, Mark Dreyfus has defended the compensation on offer.

MARK DREYFUS: The Government makes no apologies for supporting Australian jobs and competitiveness as our economy makes the transition to a clean energy future.

STEPHEN DZIEDZIC: But this research suggests that LNG producers and black coal miners would continue to open new mines or to continue to open new projects even if there was no compensation.

MARK DREYFUS: This assistance to these industries is designed to address the particular circumstances of each of these sectors.

STEPHEN DZIEDZIC: How about steel? Is the Government essentially confusing two different instincts here; are you providing protection for the other pressures that it's facing through carbon tax compensation?

MARK DREYFUS: Not at all. We think that following BlueScope's announcement that they would restructure their operations which, as we've heard, is going to result in the loss of around 1,000 jobs. The facility that we've announced for the steel transformation plan is appropriate to provide the support that Australian jobs need. And we're going to be continuing to take that approach of supporting jobs.

STEPHEN DZIEDZIC: Is there a possibility though in your eagerness to make sure that there are no losers in this carbon tax debate that you've essentially handed tax payers' money to heavy industry?

MARK DREYFUS: Not at all. What we have here is an appropriate package that is designed to move the Australian economy to the clean energy opportunities that are there, creating new products, creating new markets, creating new jobs for Australians.